Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended September 30, 2018, for iGambit Inc. (Note: The input metadata referenced "Nutex Health Inc.", but the filing text explicitly identifies the registrant as iGambit Inc.). iGambit is a holding company focused on medical technology, primarily through its subsidiary HealthDatix, Inc., which provides Software-as-a-Service (SaaS) solutions for Medicare Annual Wellness Visits and Chronic Care Management. The company has discontinued operations related to its former subsidiaries, Arcmail and Gotham.
Key Financial Metrics
| Metric | Three Months Ended Sep 30, 2018 | Nine Months Ended Sep 30, 2018 | As of Sep 30, 2018 |
|---|---|---|---|
| Revenue | $22,582 | $30,500 | N/A |
| Net Income (Loss) | $(608,519) | $(1,944,799) | N/A |
| Gross Profit | $14,748 | $6,842 | N/A |
| Operating Loss | $(367,012) | $(1,267,990) | N/A |
| Cash and Cash Equivalents | N/A | N/A | $3,182 |
| Total Assets | N/A | N/A | $2,779,641 |
| Total Liabilities | N/A | N/A | $1,213,838 |
| Stockholders' Equity | N/A | N/A | $1,565,803 |
| Accumulated Deficit | N/A | N/A | $(11,593,368) |
| Convertible Debentures (Net) | N/A | N/A | $489,922 |
| Derivative Liability | N/A | N/A | $227,287 |
Liquidity: The company reported a working capital deficit of $1,184,675. Cash on hand was $3,182 at period end.
Material Changes vs. Prior Period
- Revenue: Revenue increased slightly to $30,500 for the nine months ended September 30, 2018, compared to $27,957 in the prior year period. This growth is attributed to HealthDatix operations.
- Net Income/Loss: The company reported a net loss of $1,944,799 for the nine months ended September 30, 2018, a significant deterioration from the net income of $4,435,690 in the same period in 2017. The 2017 income was heavily influenced by a $6.66 million gain on the disposal of the Arcmail subsidiary (discontinued operations), which did not recur in 2018.
- Operating Expenses: General and administrative expenses decreased to $752,930 (nine months 2018) from $1,465,357 (nine months 2017), driven by reductions in payroll, marketing, and consulting fees.
- Other Expenses: Significant non-operating expenses in 2018 included a $233,734 loss on extinguishment of debt and a $128,100 loss from the change in fair value of derivative liabilities. Interest expense rose to $314,975 compared to $30,333 in the prior year.
- Balance Sheet: Total assets decreased to $2.78 million from $3.33 million at year-end 2017, primarily due to the amortization of intangible assets. Total liabilities increased to $1.21 million from $960,000, driven by new convertible debt issuances and an increase in derivative liabilities.
Guidance, Outlook, Risks, and Unusual Items
- Going Concern: The filing includes a "Going Concern" warning. The company has an accumulated deficit of $11.6 million and a working capital deficit. Management states that continuation is dependent on obtaining necessary equity financing and generating revenue from HealthDatix. There is substantial doubt about the company's ability to continue as a going concern without additional capital.
- Financing Strategy: The company intends to fund operations through further issuances of securities and debt. It has no lines of credit or bank financing arrangements. Recent financing included $676,500 in proceeds from convertible debentures and $30,000 from common stock sales during the nine-month period.
- Unusual Items:
- Derivative Liabilities: The company recorded a significant derivative liability ($227,287) due to embedded conversion features in its convertible notes, which are revalued quarterly.
- Debt Conversions: During the period, noteholders converted $387,000 of principal and $23,746 of accrued interest into approximately 32.6 million shares of common stock.
- Preferred Stock: In August 2018, the company designated and issued 1,000 shares of Series A Preferred Stock to the CEO, granting 51% voting control when combined with common holdings.
- Outlook: Management anticipates increased operating expenses and capital expenditures related to the development and marketing of HealthDatix. No specific financial guidance was provided.
Investor Verification Checklist
- Cash Runway: Verify the sufficiency of the $3,182 cash balance against the reported working capital deficit and upcoming debt maturities.
- Dilution Risk: Assess the impact of outstanding convertible notes (with reset provisions and discounts) and 10.3 million outstanding options/warrants on future share count.
- Revenue Concentration: Note that two customers accounted for 98% of HealthDatix sales in the nine-month period, creating significant concentration risk.
- Debt Structure: Review the terms of the convertible debentures and notes, specifically the "ratchet" or reset provisions that can significantly increase the number of shares issued upon conversion.
- Going Concern Status: Confirm the company's ability to secure the additional equity financing required to fund operations for the next 12 months.